When using management by exception, managers investigate only those variances that
are unfavorable.
Absorption costing is used to analyze contribution margin.
The capital expenditures budget is completed before the preparation of the cash budget.
A standard cost system helps management set performance standards.
The sales level at which operating income is zero is called the breakeven point.
A company should decide to process its product further if the additional revenue
exceeds the additional cost.
An investment center manager is responsible for generating profits and managing
invested capital.
Management’s minimum desired rate of return on a capital investment is known as the
return on investment.
Activity-based management is not suitable for service companies as it deals with the
proper allocation of manufacturing overhead costs.
Based on the following, what is the total production cost flexible budget variance?
A) $925 F
B) $450 U
C) $725 F
D) $725 U
Which of the following best describes the term capital rationing?
A) a method of determining the period within which the cash invested is recouped
B) a process of ranking and choosing among alternative capital investments based on
the availability of funds
C) a method which shows the effect of an investment on a company’s accrual-based
income
D) a process of controlling operating costs when adequate funds are not available
When the total variable costs are deducted from total mixed costs, we obtain ________.
A) mixed cost per unit
B) variable cost per unit
C) total high-low costs
D) total fixed costs
Which of the following is true of the sales budget?
A) It provides sales data that is used to prepare financial statements for external
reporting purposes.
B) It captures the variable and fixed expenses of the business.
C) It is used in the production budget.
D) It shows the cost of expected production in a period.
Which of the following is true of source documents in an accounting information
system?
A) All journal entries can be considered as source documents in an accounting
information system.
B) Source documents provide control and reliability in an accounting information
system.
C) A manual document cannot be considered as a source document in an accounting
information system.
D) In a manual accounting information system, source documents refer to financial
statements.
An effective accounting information system that provides relevant information
________.
A) increases the likelihood of fraud and errors
B) reduces the cost of employing an accounting information system
C) improves decision making and reduces uncertainty
D) improves the accuracy of data entry when manual
Melville Company makes special equipment used in cell towers. Each unit sells for
$410. Melville produces and sells 12,700 units per year. They have provided the
following income statement data:
A foreign company has offered to buy 85 units for a reduced sales price of $320 per
unit. The marketing manager says the sale will not affect the company’s regular sales.
The sales manager says that this sale will require incremental selling and administrative
costs, as it is a one-time deal. The production manager reports that it would require an
additional $20,000 of fixed manufacturing costs to accommodate the specifications of
the buyer. If Melville accepts the deal, how will this impact operating income? (Round
any intermediate calculations to the nearest cent, and your final answer to the nearest
dollar.)
A) Operating income will increase by $1,501.
B) Operating income will decrease by $1,501.
C) Operating income will increase by $27,200.
D) Operating income will decrease by $18,499.
On June 30, Coral, Inc. finished Job 750 with total job costs of $4,700, and transferred
the costs to Finished Goods Inventory. On July 6, it completed the sale of the goods to a
customer for $5,000 cash. Which of the following is the correct journal entry to record
the cost of goods sold?
A) debit Finished Goods Inventory $4,700 and credit Cost of Goods Sold $4,700
B) debit Cost of Goods Sold $4,700 and credit Work-in-Process Inventory $4,700
C) debit Work-in-Process Inventory $4,700 and credit Cost of Goods Sold $4,700
D) debit Cost of Goods Sold $4,700 and credit Finished Goods Inventory $4,700
Zane Set Designs Company has received an award which entitles it to receive annual
payments of $10,000 at the end of each year for the next ten years. Which of the
following is used to calculate today’s value of this award?
A) Present Value of $1
B) Present Value of an Ordinary Annuity of $1
C) Future Value of $1
D) Future Value of an Ordinary Annuity of $1
The balance sheet of a ________ company will include Work-in-Process Inventory as a
line item.
A) manufacturing
B) merchandising
C) service
D) trading
An enterprise resource planning (ERP) is a ________.
A) hardware system that controls the access of employees to different levels of
production in a firm
B) software system used by small companies to record revenue and expenses
C) hardware system of electronic linkages that allows different computers to share the
same information
D) software system that can integrate all of a company’s functions, departments, and
data into a single system
If a business operates in an industry that experiences significant cost changes, should
the business prepare its production cost report using the FIFO method or the
weighted-average method? Explain your answer.
Complete the statement, using the following terms: increase, decrease, or have no
effect on.
Increases in variable cost per unit ________ contribution margin per unit and ________
the breakeven point.
Identify each cost below as variable (V), fixed (F), or mixed (M), relative to units sold.
Explain the reason for your answer.
( Accounted for = Completed and transferred out + In process
List and briefly discuss three major differences between just-in-time costing (JIT) and
traditional costing.
List three ways in which using a standard cost system helps managers.